Local banks welcome small business legislation

Early reviews are positive for the small business bill signed into law Thursday by President Barack Obama.

At a Daily Transcript roundtable held hours after Obama signed the $42 billion Small Business Jobs Act, local lending industry leaders said the bill has “terrific” incentives for community banks to lend money to small businesses.

“Loan demand is down and (that’s) a core problem with the economy, as far as getting things going. This, I think, is a terrific addition to support taking more risks from a banking perspective,” Paul Rodeno, president and chief executive officer of Security Business Bank. “We’re going to be one that’s going to apply for the funds to allow us to leverage up and do more business lending.”

The major aims of the Small Business Jobs Bill are to increase lending from community banks and grant tax incentives to small businesses, so that they can grow and hire new employees.

Some of the key components are raising the maximum amount allowed in certain Small Business Administration loan programs; extending fee relief; creating new tools for debt refinance; tax breaks that let business owners write off the first $500,000 in new equipment; and allowing the self employed to write off their health care costs.

“This legislation has been in the works now for quite some time and it’s great news for small businesses that this was finally passed and signed by the president,” said Kurt Chilcott, the president and CEO of CDC Small Business, a non-profit group that helps small businesses find financing, working in part with the SBA.

“The legislation contains a broad array of benefits to small businesses,” Chilcott continued. “It actually includes about eight different new tax breaks for small businesses, and then in our world of SBA lending, it’s really a game changer.”

Lenders said that despite economists' announcements that the recession is over, fears over risk are still keeping a lot of money on the sidelines.

Banks are wary of lending and businesses are afraid to grow, even if they have the means. This latest legislation helps mitigate those risks.

“It doesn’t solve the problems,” said Lea Zanjani, senior vice president and portfolio manager for Union Bank. “But it is that tool to go out (to customers) and say, ‘Look, if you’re thinking about (expanding), now’s the time.'”

Some small business owners have expressed concerns over the expected increase in tax violation fees, as the government tries to finance this bill by taking a closer look at tax mistakes and charging more in damages.

Small businesses tend to make more tax violations because their taxes are confusing and they can’t afford as much outside help.

Bankers at Wednesday’s roundtable also noted that some businesses may have made cuts to survive the recession, but don’t want to expand until consumer confidence picks up.

This is what Zanjani meant when she pointed out that the new legislation does not solve all the economic problems facing small businesses today.

Where the legislation could help is by reducing risk. Banks and companies alike won’t have to be so concerned about things like consumer confidence.

Butch Dorian, market president of Mutual of Omaha Bank in San Diego said that this bill allows banks to help companies that have survived the recession, but not without some bumps and bruises, and can help them move forward.

“A lot of times when we look at financials, its historical (numbers that matter), and the last couple of years haven’t been that great for a lot of companies,” Dorian said. “This allows us to take additional risk.”